Overview of China’s Monetary Landscape
December 2024 saw a mixed yet optimistic picture for China’s monetary indicators, as detailed in the latest analysis by UOB Kay Hian. While credit demand remained weak, there were notable improvements in key areas like M1 and M2 money supply growth, alongside stronger-than-expected new bank loans and total social financing (TSF). This report dives deep into these developments, highlighting their implications and the need for continued policy support.
M1 and M2 Money Supply: Gradual Improvement
China’s M1 money supply growth improved to -1.4% year-on-year (yoy) in December 2024, beating market expectations of -1.8%. Although the growth remained negative, it marked consecutive improvements throughout the fourth quarter of 2024. Meanwhile, M2 money supply growth climbed to 7.3% yoy, consistent with Bloomberg’s consensus forecast. This uptick represented a 0.2 percentage point increase from November’s 7.1% growth.
The improvement in M2 reflects a gradual recovery in monetary circulation, but challenges remain as credit demand continues to show signs of weakness.
New Bank Loans: A Strong December Performance
China’s new bank loans in December 2024 totaled RMB 0.99 trillion, significantly exceeding market expectations of RMB 0.77 trillion and November’s RMB 0.58 trillion. However, the surge was primarily driven by short-term loans, which rose from RMB 0.08 trillion to RMB 0.49 trillion. In contrast, medium- and long-term loans decreased by RMB 0.17 trillion to RMB 0.34 trillion, suggesting a cautious lending environment for long-term investments.
Total Social Financing (TSF): Exceeding Expectations
New TSF in December reached RMB 2.86 trillion, well above the consensus forecast of RMB 2.16 trillion and November’s RMB 2.33 trillion. This growth was driven by stronger new loans, although the yoy growth of outstanding loans decelerated to 7.6% due to a higher base for comparison. On the other hand, outstanding TSF growth increased to 8.0% yoy, buoyed by robust bond issuance.
Despite these positive figures, overall credit demand remains subdued, underscoring the necessity of continued policy interventions to stimulate economic activity.
Key Monetary Indicators for December 2024
| Indicator |
December 24 |
Consensus |
November 24 |
October 24 |
September 24 |
August 24 |
July 24 |
| M0 Money Supply |
13.0% |
– |
12.7% |
12.8% |
11.5% |
12.2% |
12.0% |
| M1 Money Supply |
-1.4% |
-1.8% |
-3.7% |
-6.1% |
-7.4% |
-7.3% |
-6.6% |
| M2 Money Supply |
7.3% |
7.3% |
7.1% |
7.5% |
6.8% |
6.3% |
6.3% |
| Outstanding Bank Loans |
7.6% |
– |
7.7% |
8.0% |
8.1% |
8.5% |
8.7% |
| Outstanding TSF |
8.0% |
– |
7.8% |
7.8% |
8.0% |
8.1% |
8.2% |
| New Bank Loans (RMB trillion) |
0.99 |
0.77 |
0.58 |
0.50 |
1.59 |
0.90 |
0.26 |
| New TSF (RMB trillion) |
2.86 |
2.16 |
2.33 |
1.41 |
3.76 |
3.03 |
0.77 |
Breakdown of Outstanding TSF
In December, outstanding TSF components showed varying growth rates:
- Renminbi loans grew by 7.2% yoy, slightly down from November’s 7.4%.
- Forex loans contracted sharply by -22.3% yoy, continuing a trend of negative growth.
- Entrusted loans decreased marginally by -0.5% yoy.
- Trust loans grew by 10.2% yoy, reflecting stable performance.
- Bank acceptances shrank by -13.3% yoy, indicating a decline in this financing channel.
- Corporate bond issuance accelerated to 3.8% yoy from 2.5% in November.
- Government bond issuance surged to 16.2% yoy, highlighting strong fiscal support.
- Equity issuance remained stable at 2.5% yoy.
Conclusion and Outlook
While December 2024 brought encouraging signs of recovery in China’s monetary indicators, weak credit demand remains a pressing challenge. Policymakers may need to sustain or even amplify supportive measures to bolster long-term economic growth. Key improvements in M2 growth, new loans, and TSF highlight areas of resilience, but the uneven distribution of credit demand calls for cautious optimism as 2025 unfolds.
